The past year has been tumultuous for Latin American politics, characterised by a shift to the right in election results and away from populism in policy, and numerous corruption scandals. Current risk levels are likely to linger in the coming year.

Latin American countries not appear to be breaking out of the middle-income trap. Productivity growth has been disappointingly low in recent decades. There are several big structural issues, such as severe human capital and infrastructure constraints.

Throughout history Latin America’s fortunes have been tightly linked with commodity prices. It seems we are currently at the end of yet another commodity price cycle. Where does Latin America stand now?

Latin American currencies have weakened substantially against the US dollar during 2015. The prospect of a Fed hike, fallen commodity prices and weaker global demand in general weigh on currency valuations, particularly the Brazilian real.

A number of Latin American countries have pursued populist policies with tailwind from the commodity price bubble. Now commodity prices are no longer propping up political stability, political risk in the region is set to rise.